The Prescription Drug User Fee Act: Much More Than User Fees

Abstract

Background:

The Prescription Drug User Fee Act (PDUFA) is due for reauthorization in 2022. Beyond creating the user fee program which now generates a majority of the FDA Human Drugs Program budget, PDUFA has made numerous additional changes to FDA policy during its 29-year history. FDA’s budgetary dependence on user fees may advantage industry in negotiating favorable policy changes through PDUFA.

Methods:

The full texts of all prior PDUFA reauthorization bills and all submitted public comments and meeting minutes for the 2022 reauthorization were reviewed. Provisions affecting FDA regulatory authority and processes were identified.

Findings:

PDUFA legislation has instituted a broad range of changes to FDA policy, including evidentiary standards for drug approval, accelerated pathways for approval, industry involvement in FDA decision-making, rules regarding industry information dissemination to providers, and market entry of generic drugs. Negotiations over the 2022 reauthorization suggest that industry priorities include increased application of real-world evidence, regulatory certainty, and increased communication between FDA and industry during the drug application process.

Conclusions:

The need for PDUFA reauthorization every 5 years has created a recurring legislative vehicle through which far-ranging changes to FDA have been enacted, reshaping the agency’s interactions and relationship with the regulated industry. The majority of policy changes enacted through PDUFA legislation have favored industry through decreasing regulatory standards, shortening approval times, and increasing industry involvement in FDA decision-making. FDA’s budgetary dependence on industry, the urgency of each PDUFA reauthorization’s passage to maintain uninterrupted funding, and industry’s required participation in PDUFA negotiations may advantage industry.

The seventh version of the Prescription Drug User Fee Act (PDUFA) will be in front of Congress in 2022, repeating a five-year cycle that began with the Act’s first passage in 1992.¹ The first version of PDUFA was narrow in scope, as its focus was shortening drug review times. In the 1980’s, New Drug Application (NDA) reviews averaged 29 months.² To generate additional revenue to support FDA, Congress implemented user fees through PDUFA. These fees, collected from industry applicants, allowed for an increase in FDA staff dedicated to drug application review; within six years, review times had declined to 12 months.³ But PDUFA’s scope has since widened. In principle, FDA’s statutory requirement to negotiate PDUFA contents with industry extends to only the parameters of the user fee program itself.⁴ However, commitments by the FDA to industry – as contained in the post-negotiation commitment letters – often extend well beyond operational objectives.⁵ The PDUFA VII reauthorization bill due in 2022 will likely contain not only a new user fee schedule but a range of provisions that will continue to reshape FDA policy.

I. PDUFA Background

To continue the authority to collect user fees, PDUFA must be reauthorized before the end of the fiscal year on September 30, 2022.¹ In anticipation of this deadline, the reauthorization process begins over two years prior with an initial public meeting. This meeting is followed by several months of required negotiations between FDA, industry, and other stakeholders.^1,6 The outcome of these negotiations is released in a public commitment letter which is reviewed by multiple federal agencies before introduction to Congress. The content of each PDFUA legislative passage is ultimately at the discretion of Congress,¹ but the limited time frame for Congressional action (PDUFA legislation is typically introduced to Congress within six months of the deadline; the 2007 authorization was introduced just twelve days prior)⁷ may constrain Congress’ ability to substantively renegotiate the FDA-industry agreement. The limited time frame and the perception of PDUFA reauthorization as “must pass legislation” has made the legislative package containing PDUFA an attractive target for legislators to add additional provisions, often related to other aspects of FDA governance.^2,8 In 2020, user fees totaled $1.3B, accounting for approximately 65% of the Human Drugs Program budget,⁹ the largest sub-unit of the FDA. Without renewal, user fee collection would cease, jeopardizing the FDA staff that these fees support and disrupting FDA operations,³ creating substantial pressure to pass each renewal bill.¹⁰ By relying on user fees rather than appropriations to fund the FDA, and requiring their renewal every five years, Congress created a recurring, must-pass legislative vehicle that has fundamentally changed how the FDA interacts with the industry it is charged with regulating.^2,8

II. Analysis Scope and Methods

In this analysis, we aimed to assess the impact of PDUFA legislation beyond the user fee program itself, by identifying all provisions of PDUFA laws that made changes to FDA regulatory policy or the agency’s interactions with the regulated industry. Two authors reviewed the full texts of all enacted PDUFA reauthorization laws to identify provisions that affected regulatory policy, with disagreements resolved through group consensus (Table 1). Relevant text of included provisions is presented in the Supplement. To offer insight into upcoming PDUFA legislation, we similarly reviewed all submitted public comments and meeting minutes to date from negotiations during the current reauthorization cycle.

Table 1.

PDUFA Provisions Effecting FDA Policy Changes

PDUFA Version	Provisions
PDUFA I	Formalized Priority Review pathway (agreement outside of legislative text)
PDUFA II	Broadened user fee scope to include preclinical development [Sec 103] Changes to evidentiary standard for drug approval from two to one clinical trial [Sec 115] Created the Fast Track pathway [Sec 112] Established industry right to receive binding commitment on trial design [Sec 119] Created scientific advisory panels [Sec 120] Established industry right to recourse to scientific advisory panels in cases of “scientific controversy” [Sec 404] Allowed industry to disseminate information on off-label uses [Sec 401] Affirmed industry right to disseminate “health care economic information” [Sec 114] Created exclusivity extension for conducting pediatric studies [Sec 111]
PDUFA III	Broadened user fee scope to include post-market surveillance for 3 years [Sec 503] Required that industry participate in negotiations for future PDUFA reauthorizations [Sec 505]
PDUFA IV	Broadened user fee scope to include post-market surveillance indefinitely [Sec 101] Broadened user fee scope to include post-market activities including confirmatory trials and labeling changes [Sec 102] Authorized Risk Evaluation and Mitigation Strategies (REMS) [Sec 901] Authorized the Sentinel Initiative for post-market surveillance [Sec 905] Strengthened ability of FDA to require post-marketing trials or labeling changes in response to safety signals [Sec 901]
PDUFA V	Encouraged increased use of Accelerated Approval [Sec 901] Created the Breakthrough Therapy pathway [Sec 902]
PDUFA VI	Directed FDA to explore alternative clinical trial designs [Sec 610] Expedited approval of certain classes of high-need generic drugs [Sec 801, 803]

To better assess the net impact, we grouped provisions with respect to regulatory area (Table 2): 1) scope of review and oversight funded by user fees, 2) evidentiary standards for drug approval, 3) pathways for drug approval, 4) industry involvement and recourse in FDA decisions, 5) information dissemination by industry, 6) generic drug competition, 7) drug safety and monitoring. We then assessed the impact of the most critical changes and forecast what additional changes might ensue from the current PDUFA reauthorization cycle. Though Congress has subsequently instituted user fees for devices, biologics, and other products under FDA authority, we focused on the original prescription drug user fee program. For clarity, we refer to the laws which contained each PDUFA reauthorization by the PDUFA cycle number (eg., PDUFA III, PDUFA IV, etc.).

Table 2.

Policy Areas Affected by Prescription Drug User Fee Act (PDUFA) Legislation.

Year	Title of Legislation Containing PDUFA Reauthorization	Policy Areas	User Fees Contribution to Human Drug Program Budget During Year of Passage (Nominal USD, millions), Percent of Human Drug Program Budget
1992	Prescription Drug User Fee Act of 1992 (PDUFA), Pub. L. No. 102–571, 106 Stat. 4491 (1992)a	User fee scope Approval paths for drugs	$0b
1997	Food and Drug Administration Modernization Act of 1997 (FDAMA); Prescription Drug User Fee Act of 1997 (PDUFA II), Pub. L. No. 105–115, 111 Stat. 2296 (1997)c	User fee scope Evidentiary standards for drug approval Approval paths for drugs Regulated industry interaction and recourse Information dissemination by industry Generic drug competition	$53, 21.0%b
2002	Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (PHSBPRA); Prescription Drug User Fee Act of 2002 (PDUFA III), Pub. L. No. 107–188, 116 Stat. 594 (2002)d	User fee scope Regulated industry interaction and recourse	$110, 30.1%b
2007	Food and Drug Administration Amendments Act of 2007 (FDAAA); Prescription Drug User Fee Act of 2007 (PDUFA IV), Pub. L. No. 110–85, 121 Stat. 823 (2007)e	User fee scope Safety standards and monitoring	$255, 44.7%b
2012	Food and Drug Administration Safety and Innovation Act (FDASIA); Prescription Drug User Fee Act of 2012 (PDUFA V), Pub. L. No. 112–144, 126 Stat. 993 (2012)f	Evidentiary standards for drug approval Approval paths for drugs Generic drug competition	$501, 51.2%g
2017	FDA Reauthorization Act of 2017 (FDARA); Prescription Drug User Fee Act of 2017 (PDUFA VI), Pub. L. No. 115–52, 131 Stat. 1005 (2017)h	Evidentiary standards for drug approval Generic drug competition	$838, 63.0%g

^a Prescription Drug User Fee Act of 1992

^b Data from the Congressional Research Service report: The Food and Drug Administration: Budget and Statutory History, FY1980-FY2007

^c Prescription Drug User Fee Act of 1997 (PDUFA II)

^d Prescription Drug User Fee Act of 2002 (PDUFA III)

^e Prescription Drug User Fee Act of 2007 (PDUFA IV)

^f Prescription Drug User Fee Act of 2012 (PDUFA V)

^g Data from the Congressional Research Service report: The Food and Drug Administration (FDA) Budget: Fact Sheet, July 10, 2017

^h Prescription Drug User Fee Act of 2017 (PDUFA VI)

III. Regulatory Changes Enacted Through PDUFA

User fee scope

PDUFA I focused on shortening NDA review. Initially, user fees could be allocated only towards “activities necessary for the review of human drug applications and supplements.”^1,11 PDUFA II broadened user fees to fund activities “related to preclinical and clinical trial phases of a new drug’s development”¹ [PDUFA II, Sec 103]. PDUFA III extended them further, to fund reviews of post-market safety information for the first 3 years after approval¹² [PDUFA III, Sec 503]. PDUFA IV lifted the three year limit¹³ and broadened the post-approval activities covered by user fees to encompass development of adverse event reporting systems, management of adverse event data, and enforcement of FDA requirements such as post-marketing trials, labeling changes, and risk evaluation and mitigation strategies^1,14 [PDUFA IV, Sec 101–102].

The size of the fee associated with a new drug application has increased over time. At the time of PDUFA’s enactment, the fee was $100,000^11,15 – approximately $179,000 in 2020 dollars – in comparison to $2,875,842 for new applications involving clinical data during fiscal year 2021.¹⁶

Evidentiary standards for drug approval

PDUFA reauthorizations have changed the clinical evidence required to support drug approval. In 1997, PDUFA II reduced the requisite number of clinical effectiveness studies for marketing approval from two to one [PDUFA II, Sec 115].^17,18 PDUFA V (2012) encouraged the FDA to broaden the “range of surrogate or clinical endpoints [in drug development and review]…which may result in fewer, smaller, or shorter clinical trials…” and to increase its utilization of the accelerated approval mechanism which allows initial market entry on the basis of surrogate endpoints alone [PDUFA V, Sec 901]. PDUFA VI (2017) directed the FDA to convene a public meeting to explore using “trials that employ alternative designs” and “data obtained from expanded access trials” for regulatory action. [PDUFA VI, Sec 610].

Approval paths for drugs

PDUFA and its reauthorizations have expanded the number and nature of drug review paths. As part of the agreement with industry that led to PDUFA I passage, FDA committed (outside of the law’s text itself) to codifying the Priority Review system – for drugs that treat a serious condition and provide “significant improvement in safety or effectiveness” – and to the target review time of six months for priority review drugs (at the time, the target for standard review was 12 months).^8(p15),19,20 PDUFA II (1997) formally authorized the Fast Track designation for drugs that will treat a serious condition and address an “unmet medical need.”²¹ Fast Track status grants the applicant “frequent interactions” with the FDA early in the development process (including pre-IND meetings) to reach agreement on trial design and data reporting requirements. Fast Track drugs have their applications reviewed on a “rolling” basis and can also be considered for Priority Review or Accelerated Approval [PDUFA II, Sec 112].²²

PDUFA V (2012) created the Breakthrough Therapy pathway for drugs treating serious conditions that have “preliminary clinical evidence” suggesting they may achieve “substantial improvement over existing therapies.” Breakthrough therapies receive all benefits of Priority Review, as well as “intensive guidance” from the FDA on “efficient” trial design to meet the statutory standard for approval, including those without randomized comparators such as single-arm, historical control, or N-of-1 trials [PDUFA V, Sec 902].²²

Regulated industry interaction and recourse

PDUFA legislation has expanded industry involvement in drug application review and added routes of appeal. PDUFA II (1997) codified the industry’s right to meet with the Secretary to both discuss and receive a written agreement on the adequacy of the design of clinical trials to support efficacy claims, which is binding except in cases where a “substantial scientific issue” arises after the trial has begun [PDUFA II, Sec 119]. It also directed the Secretary to create or to use existing scientific advisory panels (SAPs) to provide recommendations on approval decisions [PDUFA II, Sec 120]. SAPs are required to include consumer and industry representatives [PDUFA II, Sec 120] and serve as a recourse vehicle for industry in cases of “scientific controversy” with the Secretary [PDUFA II, Sec 404]. The law articulated how panelists may obtain conflict of interest waivers if they possessed “essential expertise” to the drug review and evaluation process [PDUFA II, Sec 120]. PDUFA III (2002) required the FDA to negotiate “with the regulated industry” regarding the contents of subsequent PDUFA reauthorizations before submitting its recommendations to Congress [PDUFA III, Sec 505].

Information dissemination by industry

PDUFA II (1997) relaxed limits on industry communications with physicians, payors, and formulary committees. It allowed industry to provide peer reviewed literature promoting off label uses to providers, payors, plans and benefit managers, and federal and state agencies as long as that literature “would be considered to be scientifically sound by experts” who are “qualified by scientific training or experience” [PDUFA II, Sec 401].²³ The law further specified that health economic evaluations of on-label uses provided by industry to payors and formulary committees “shall not be considered…false or misleading” provided they are “based on competent and reliable scientific evidence” [PDUFA II, Sec 114].

Generic drug competition

PDUFA II (1997) created and PDUFA V (2012) made permanent a 6-month market exclusivity extension (delaying generic competition) granted to drugmakers for conducting studies in pediatric populations. Such studies may not need to show efficacy; even pharmacokinetic studies may qualify at the discretion of the Secretary [PDUFA II, Sec 111; PDUFA V, Sec 501]. PDUFA VI (2017) included provisions to expedite the approval of generic drugs for reference products that had fewer than three approved generics, for those on FDA drug shortages list [PDUFA VI, Sec 801], and for “competitive generics” (drugs with one or no generic competitors) [PDUFA VI, Sec 803].

Safety standards and monitoring

PDUFA IV (2007) introduced the use of Risk Evaluation and Mitigation Strategies (REMS), a program that can be required either at approval or post-approval for drugs with safety concerns [PDUFA IV, Sec 901].²⁴ REMS programs range from those that require patient educational measures to those that require certification and monitoring of designated prescribers.²⁴ PDUFA IV also created the Sentinel Initiative for post-market surveillance of drug safety [PDUFA IV, Sec 905], allowing the FDA to monitor data streams, such as electronic health records and claims, for safety signals. It also strengthened FDA authority to require post-marketing trials or labeling changes in response to observed safety signals [PDUFA IV, Sec 901].

IV. Consequences of PDUFA’s Regulatory Changes for Science, Industry, and the Public

At the time of PDUFA’s initial passage in 1992, some analysts raised concerns that introducing both user fees and a recurring need to reauthorize their collection would undermine the agency’s independence from the regulated industry.¹⁰ Because of FDA’s budgetary dependence on industry user fees, industry has the advantaged negotiating position in PDUFA’s five-year renewal cycle, allowing it to achieve regulatory concessions from FDA.^2,3,10 FDA may also become reluctant to issue policies or reach application determinations that the industry considers unfavorable.³ Though Congress may enact FDA policy outside of PDUFA legislation, PDUFA is unique in industry’s explicit role in negotiating the commitment letter that forms the basis of each reauthorization [PDUFA III, Sec 505]. In line with the mandate for negotiation with industry, the FDA held 70 meetings with industry when negotiating PDUFA VI, and well over 100 such meetings regarding the upcoming PDUFA VII reauthorization, compared to six meetings with other stakeholders.^3,6

Increased contact between industry and regulators

PDUFA legislation has increased the frequency and extent of required interactions between industry and the FDA throughout drug development.³ In parallel, the list of regulatory reassurances the FDA must give the industry has also expanded, stretching from “intensive guidance” during the early phases of drug development,²² to giving binding agreements regarding the adequacy of pivotal trials before they are conducted. Scientific advisory panels also increase the industry voice in approval decisions, in that they are required to include industry representatives and provide mechanisms for inclusion of conflicted experts; 13.4% of SAP voting members in recent years had industry conflicts.²⁵

Growth of expedited review pathways

Over half of new molecular entities (NMEs) use expedited review pathways created or formalized under PDUFA, including Priority Review, Fast Track, and Breakthrough Therapy.¹⁸ Though aligned with PDUFA’s original goal of reducing review time, these expedited pathways have tradeoffs. Faster reviews are less thorough,^26,27 and post-market boxed (“black box”) warnings and withdrawals due to safety concerns have increased in the post-PDUFA era.^18,28,29 Though it is difficult to identify a single cause for this increase in post-market safety signals, the increased number of occurrences among drugs whose reviews were hastened to stay within PDUFA targets suggests that the targets themselves may be partially to blame.³⁰

Reduction in evidentiary standards for drug approval

When PDUFA II reduced the requisite number of Phase III clinical trials for approval from two to one, this codified a practice already in place at FDA; informal guidelines allowed a single trial to be accepted in some cases.³¹ However, the elevation of single-trial permissibility to statue marked a decline in the number of new drugs still adhering to the two-trial standard. Leading up to PDUFA II’s passage in 1995–1997, 81% of new drugs were supported by two pivotal trials.³² This proportion declined to 53% by 2015–2017, even as the quality of pivotal trials has also declined, in term of an increased use of placebo controls (rather than active comparators) and single-arm designs.³² The ability to more frequently gain approval through a single trial is advantageous to industry. A single trial is more likely to produce a false positive result due to type 1 error, whereas two trials are unlikely both to be falsely positive. The costs and time needed for research prior to approval are reduced, speeding time to market in some cases lengthening the duration of market monopoly.³³

PDUFA has further lowered evidence standards by directing the agency to use surrogate endpoints through the Accelerated Approval pathway. In principle, Accelerated Approval requires post-approval confirmatory studies using clinically meaningful endpoints, but FDA enforcement of this requirement has been poor. Most drugs receiving accelerated approvals do not undergo confirmatory studies on time, if they undergo them at all, and negative confirmatory trials do not always lead to withdrawal.³⁴ Industry is therefore able to generate substantial revenue from drugs without confirmed clinical benefit.^18,35 The other expedited review pathways established through PDUFA, such as the Fast Track and Breakthrough Therapy designations, contribute to shorter review times and approvals that are based on trials that are smaller, use surrogate endpoints, lack comparators, or have brief follow-up periods, and can garner approval even with evidence of substantial toxicities.^3,10,36–38

Consequences of REMS

While REMS requirements were instituted ostensibly to improve patient safety, the Office of the Inspector General summarized the program as a means for the industry to market “drug[s] that would otherwise be unavailable due to known serious risks.”³⁹ Consistent with this characterization, of the 12 drug approvals from 2011–15 that had intra-agency disagreement regarding approval, 11 were approved with a post-marketing requirement or REMS.⁴⁰ That the FDA “has not identified reliable methods to assess the effectiveness of REMS” in mitigating known risks supports concern that REMS may enable the approval of less safe products without actually providing effective safeguards.⁴¹

Industry has manipulated REMS to prolong market monopolies, citing REMS requirements to block access to their drug for use in bioequivalence testing by potential generic competitors.^24,42 During the 10 years following the institution of REMS in 2007, over 100 generic manufactures complained to the FDA that they were being subject to this practice.⁴³

Potential changes in upcoming PDUFA VII reauthorization

The industry-FDA negotiations over PDUFA VII began with a July 2020 public meeting.⁴⁴ A particular focus of industry in these negotiations has been “real-world evidence.”^45–50 Industry representatives have proposed that expanded use of real-world evidence may eliminate “the need for a placebo arm” or the need for prospective clinical trials altogether.⁴⁸ Industry is also pursuing “regulatory flexibility” with “regulatory certainty” regarding how future approvals could be based on observational data, non-randomized trial designs, and surrogate endpoints.^{45–47,51–53} Industry is also seeking to further increase the number of required meetings and avenues for FDA-industry communication throughout the application process,^{47,52,54–56} and has proposed shortening the target time frames for FDA reviews.⁵³

V. Policy Considerations

PDUFA was originally intended as a tool to reduce a growing backlog of drug applications, and the five-year sunset as a mechanism to ensure the law effectively in achieved that goal. The subsequent PDUFA reauthorizations, however, have grown to include additional legislation that has profoundly reshaped the FDA’s rules and authority. Congress may have instituted these changes to the FDA absent PDUFA, but the user fee reauthorization cycle gives industry a unique opportunity to achieve its legislative goals. Each PDUFA reauthorization creates a “must pass” legislative vehicle on which industry can focus its energy and lobbying efforts, which Congress must then consider and vote on within a limited time frame, constraining its ability to substantially revise the commitments resulting from FDA-industry negotiation.

The FDA’s reliance on user fees and may now seem entrenched and irrevocable. But each PDUFA reauthorization cycle offers policymakers the opportunity to reconsider Congress’ 1992 decision to institute user fees. The $1.3 billion in prescription drug user fees collected annually, while representing two-thirds of the Human Drug Program budget,⁹ is trivial in the context of federal expenditures; it is less than 1% of what Medicare alone spends on pharmaceuticals.⁵⁷ User fees could easily be replaced by general appropriations.

Dr. David Kessler, the FDA commissioner who ultimately advocated for the implementation of user fees as the most expedient path to a much-needed increase in FDA funding,^8(p27) maintained that there was “no question” that increasing funding through general appropriations would have been preferred.^8(p21) This analysis of PDUFA’s history raises enough serious questions about PDUFA’s overall impact on US drug regulatory policy that policymakers should reconsider perpetuating this system in the current renewal cycle, and reallocate the necessary funds to relieve FDA of its financial reliance on industry.